Comprehensive Financial Accounting Analysis of Health Scope Ltd

This report provides a financial analysis of Health Scope Ltd, a global hospital group, based on its 2017 annual report. It examines the company's financial statements, including the director's report, auditor's report, and revenue analysis. The report discusses changes in sales, cash flow from operations, and retained earnings. A key component is the ratio analysis, covering liquidity, activity, and profitability ratios, to assess the company's financial health and efficiency. The analysis reveals insights into Health Scope's asset utilization, profitability, and short-term liquidity, providing a comprehensive overview of its financial performance and position.

Running head: FINANCIAL ACCOUNTING
Financial Accounting of Health Scope Ltd
Name of the Student:
Name of the University:
Author’s Note:

1FINANCIAL ACCOUNTING OF HEALTH SCOPE LTD
Executive Summary
The aim of the report is to do a financial analysis of Health Scope Ltd. The company operates in
the healthcare industry catering to various healthcare and well-being products. The dominating
part of the financial report of the company was the financial statements of the company. A brief
summary is provided for the director’s report given in the annual report of the company. The
Auditors report of the company was discussed along with the opinion of the opinion of the
auditor relating to the quality of the financial statements. The change is sales or revenue and
other operating changes for the company was discussed for the company. The ratio analysis was
performed for the company, which showed the summary of the financial performance of the
company.

2FINANCIAL ACCOUNTING OF HEALTH SCOPE LTD
Table of Contents
Introduction......................................................................................................................................3
Discussions......................................................................................................................................4
Financial Statements....................................................................................................................4
Director’s Report.........................................................................................................................4
Auditors Report...........................................................................................................................5
Revenue Analysis........................................................................................................................6
Cash Flow from Operations.........................................................................................................7
Retained Profits/ Loans and Debentures......................................................................................7
Ratio Analysis..............................................................................................................................8
Conclusion.....................................................................................................................................11
Reference.......................................................................................................................................12

3FINANCIAL ACCOUNTING OF HEALTH SCOPE LTD
Introduction
Health Scope Company operating in the health care industry is a global operator of
hospital group across the countries in Australia, Malaysia, New Zealand and Singapore. The
hospital group is ranked as the best hospital operator and group across the world. The company
has 45 hospitals in its portfolio where services like treatment centers, psychiatric units, surgery
units, and nursing services all across the world. The company provides a wide variety of
facilities in the health care region catering services like day surgery to complex surgery facilities
(Gray et al. 2016).
The company has a good employee base, which has enabled the countries serve better
and efficiently in all of its six countries. The company is one of the leading and biggest
healthcare company listed and present in Australia. Health Scope Limited annual report for the
year 2017 was selected for carrying on the financial analysis for the company. The company’s
director report is explained in brief and the company compliance with the accounting, corporate
and financial standards are well discussed.
The Audit report of the company briefs about the basis for opinion, key audit matters
involved and the general opinion about the company’s financial statement presented. Operations
of the company in respect to sales and cash flow from operating activities were discussed on the
basis of percentage change and the reasons for such changes. Ratio analysis was done on the
company’s financial statement which includes key financial ratios such as liquidity and
profitability ratios (Greco, Figueira and Ehrgott 2016).

4FINANCIAL ACCOUNTING OF HEALTH SCOPE LTD
Discussions
Financial Statements
The most dominating section of the annual report is the financial statement of the
company’s annual report. It summarizes the company’s financial report for the year. The
operations, investing and financing activities of the companies are discussed in the financials of
the company. The financial statement is the most dominating and relevant section in an annual
report as the data contains important information which are used widely by the stakeholders of
the company (Hoyle, Schaefer and Doupnik 2015). The financial report for Health Scope Limited
for the year 2017 gives a brief discussion of all financing activities done by the company during
the year. The company’s financial position and performance serves as the base for the investors
and stakeholders of the company in order to review ad oversight the company. The company has
strong fundamentals with static and growing profitability returns (Sedláček 2016).
Director’s Report
The director’s report for the company covers various part of the company’s financial,
corporate and accounting standards of the company. The directors list along with the director’s
beneficial interest in the company’s share capital is reported. The director’s disclosure about not
having any contract or agreement from the company as a supplier or creditor is disclosed by the
company. The operating review of the company is discussed, which gives a brief about the
company’s operations and the principal activities of the companies. The company inorganic
growth strategy in the form of mergers and acquisitions and joint venture business is discussed.
The financial performance section for the company includes the financial review for the
company. The financial performance of the company stated the trend and the percentage change

5FINANCIAL ACCOUNTING OF HEALTH SCOPE LTD
of company’s key financial factors like the growth of EBITDA and EBIT margins of the
company. The sectorial breakdown of group companies according to their geographical location
along with the division performance was mentioned in the financial performance of the
company. The company financial position shows that the total assets of the company has shown
a growth of 5.75% whereas the total liabilities of the companies increased by 12.59%. Overall
the net assets of the company decrease by 0.21%. The increase in the total assets of the company
was due to the rise in the accounts receivable and plant and machinery of the company. The
increase in total liabilities of the company was due to the increase in interest bearing long-term
loans and borrowings of the company, which was in the form of bank loans and bondholder’s
loan. The financial position of the company or the net assets of the company remain stable
because of the rise in assets and liabilities of the company (Yekini, Wisniewski and Millo 2016). The
business strategies, methods and prospects for the future is discussed. The company’s business
risk along with country specific risk arising due to political, environmental and technological
changes, which causes a threat for the company. The material business risk included in the report
are due to the government rules, policy and regulations, acquisitions, technological changes,
health funds, revenue from government sources, insurance and licenses are some of the key
business risk under which the company operates. The remuneration report contains the
remuneration and breakdown of remunerations paid to the directors and other key personnel of
the companies (Halverson et al. 2017).
Auditors Report
The Auditor for Health Scope Limited is Deloitte. The Auditors report for the company
contains the opinion for the auditors which states that the company’s financial statement for the
year 2017 gives and represents a true and fair opinion about the company’s financial position.

6FINANCIAL ACCOUNTING OF HEALTH SCOPE LTD
The financial reports and statement of the company represented do comply and meet the
Australian Accounting Standard Board and the Corporate Regulation Act 2001 (Reid 2015). The
auditing and the base for the opinion of financial report was given for the company in accordance
to the Australian Auditing Standards. The key financial components discussed in the financial
reports is the diversion of medical centers business, carrying value of Geelong Private Hospital
and revenue recognition are the key factors discussed. The report gives a brief about the
director’s duty and responsibilities in the financial report for the company. The Auditor’s
responsibilities for the audit of the report is given. Finally, the report on the audit of
remuneration states that the report complies with the Corporation Act 2001 (Vinson, Robertson
and Cockrell 2018).
Revenue Analysis
The revenue is recognized on the basis of the fair value of consideration received. The
amount, which is receivable till the time and the economic benefits which provides a reliability
of flow to the company is recognized in the financials (Fang and Li 2015).
Change in Sales/Revenue
Particulars 2017 2016 (%) Change
Revenue from Services 2,250.00 2,169.40 3.72%
Rental Income 28.30 27.80 1.80%
Management Fees 32.70 27.10 20.66%
Other Revenue 7.20 8.60 -16.28%
Revenue 2,318.20 2,232.90 3.82%
Table 1: Change in Revenue
(Source: Annual Report 2018)
The change in the revenue was because of the increase in the revenue from patients across the
globe. The rental income comprises the contingent rental income, which is recognized as an

7FINANCIAL ACCOUNTING OF HEALTH SCOPE LTD
income in the period it is earned. The company saw an increase of about 3.72% due to increase
in the lease of assets and services provided by the company. The increased ancillary services
such as diagnostics, therapeutic and custodial services gave a -16.28% effect to the revenue of
the company (Weng and Huang 2017).
Cash Flow from Operations
The cash flow from operations for the company overall showed a net increase in the
financials of the company the company had reported the operations of the company increasing by
about 2.19% this was mainly due to rise in receipts from customers, which rose by about 6.26%
from the year 2016-2017. However, the increase in the finance costs paid by about 13%, which
was a major effect for the operations of the company. The increasing payment to the supplier and
the same increase in the receipts has offset the same (Li, Sougiannis and Wang 2017).
Cash Flow Statement For The Year 2017
Particulars 2017 2016 (%) Change
Cash Flow from Operating Activities
Receipts from customers
2,41
1
2,26
9 6.26%
Payments to Suppliers and Employees
-
1,99
3
-
1,87
8 6.12%
Cash Generated From Operations 418 391 6.91%
Interest Received 3.70 4.50 -17.78%
Income Tax Paid
-
13.7
0
-
13.4
0 2.24%
Finance Costs
-
54.1
0
-
47.9
0 12.94%
Other Income and Expense Items
-
23.1
0
-
10.5
0 120.00%
Net Cash flow from Operating Activities 331 324 2.19%
Table 2: Cash Flow from Operations

8FINANCIAL ACCOUNTING OF HEALTH SCOPE LTD
(Source: Annual Report 2018)
Retained Profits/ Loans and Debentures
The retained earnings or the retained profits of the company represents the amount left
with the company after giving away the equity shareholders of the company with their shares of
profits. It is also called as the post-tax earnings dividends of a company, which are not paid as a
part of dividends. The amount represents the shareholders equity of the company which helps the
company in reducing the liabilities of the companies (Fairfield and Jorratt De Luis 2016). The
retained earnings for the company has remained the same from the year 2016-17. However, there
was increase in the loans and borrowings or the long-term debt of the companies, which was
mainly due to company borrowing them. The companies have significantly increased the long-
term debts, which were in the form of bank loans and loans from bondholders of the company,
which have significantly increased the financing cost for the company and increase further
financial risk associated with the company (Charles 2015).
Retained Earnings
Particulars 2017 2016 (%) Change
Net profit 110.90 181.10 -38.76%
(-) Dividends Paid 60.90 99.45 -38.76%
Retained Earnings 50.00 81.65 -38.76%
Table 3: Retained Earnings
(Source: Annual Report 2018)
Ratio Analysis
The ratio analysis of Health scope Ltd was performed, which shows the key financial
aspects of the companies. The key financial ratios discussed are liquidity ratio, activity ratio and

9FINANCIAL ACCOUNTING OF HEALTH SCOPE LTD
profitability ratio. The current ratio for the company is optimal, which is around 1.22 times that
states that the company has maintained optimal current assets allocated in respect to the current
liabilities of the companies. The quick ratio or the acid test ratio is the purest form of liquid
assets available to the company. The ratio for the company is around 0.90 times, which shows
that inventory and other assets forms a greater part of the company’s current assets and short-
term liquidity position could not be sufficiently met by the company (Uechi et al. 2015). The
cash flow ratio for the company is also around 1.04 times, which is sufficient as per the current
liabilities of the companies. The Asset Turnover ratio shows the company’s efficiency in
utilization of total assets of the company the ratio for the company is around 0.49 times, which
shows that assets is not efficiently utilized by the company. The return on equity shows the profit
deliverable to the company’s investors on the capital employed the return for the year was
around 4.68% that is not a stable return for the stakeholders of the company (Vogel 2014).
Ratio Analysis 2017
Current Ratio 1.22
Quick Ratio 0.90
Cash Flow Ratio 1.04
Asset Turnover Ratio 0.49
Percentage Return on Equity 4.68%
Workings
Current Ratio = Current Assets/Current Liabilities 2017
Current Assets 492
Current Liabilities 403
1.22
Quick Ratio: (Marketable securities+ Cash+ Trade
Receivable)/Current Liabilities.
Marketable securities+ Cash+ Trade Receivable 362
Current Liabilities 403
0.90
Cash Flow Ratio: Cash Flow from Operations/Current
Liabilities.

10FINANCIAL ACCOUNTING OF HEALTH SCOPE LTD
Cash Flow from Operations 418
Current Liabilities 403
1.04
Asset Turnover Ratio: Sales/ Average Total
Assets*100
Sales or Revenue 2318
Average Total Assets 4,701
0.49
Percentage Return on Equity: (Net Income/
Shareholder's Equity)*100
Net Income 110.9
Shareholder's Equity 2368
4.68%
Table 4: Ratio Analysis
(Source: Annual Report 2018)
Conclusion
The Health Scope Limited is one of the leading and one of the best health care service provider
due to its variety of health care services provided along with its huge and trained employee’s
base. The company has its presence in major countries along with its 45-operating center. The
company’s director report gave us a brief idea about the business strategy and the financial and
operational overview about the company. The Auditors report highlighted various aspects
according to which the company has prepared its financial statements. The operating activities
for the company has remained non-volatile with the increase in revenue for the company and
financing costs in the way of increasing interest of loans and borrowings. The ratio analysis gave
us the key financial position and review of the company for the financial year.

11FINANCIAL ACCOUNTING OF HEALTH SCOPE LTD
Reference
Annual Report. (2018). [ebook] Australia: Healthscope Limited. Available at:
http://healthscope.com.au/application/files/3715/0344/5418/HS_Annual%20Report
%20FY17_v15_FA_low.pdf [Accessed 13 Sep. 2018].
Charles, S., 2015. Is Minsky’s financial instability hypothesis valid?. Cambridge Journal of
Economics, 40(2), pp.427-436.
Fairfield, T. and Jorratt De Luis, M., 2016. Top Income Shares, Business Profits, and Effective
Tax Rates in Contemporary C hile. Review of Income and Wealth, 62, pp.S120-S144.
Fang, L. and Li, H., 2015. Centralized resource allocation based on the cost–revenue
analysis. Computers & Industrial Engineering, 85, pp.395-401.
Gray, C.S., Wodchis, W.P., Upshur, R., Cott, C., McKinstry, B., Mercer, S., Palen, T.E.,
Ramsay, T., Thavorn, K., Collaborators, P. and Inc, Q.H., 2016. Supporting goal-oriented
primary health care for seniors with complex care needs using mobile technology: evaluation and
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patient reported outcome tool. JMIR research protocols, 5(2).
Greco, S., Figueira, J. and Ehrgott, M., 2016. Multiple criteria decision analysis. New York:
Springer.
Halverson, P.K., Lumpkin, J.R., Yeager, V.A., Castrucci, B.C., Moffatt, S. and Tilson, H., 2017.
Research Full Report: High Turnover Among State Health Officials/Public Health Directors:
Implications for the Public's Health. Journal of Public Health Management and Practice, 23(5),
p.537.